Maximise your pension contributions

Usually, your employer will make regular payments into your pension pot on your behalf. And, depending on the plan you belong to, you may also make monthly contributions which will be taken from your salary. However, depending on the rules of your plan, there may be up to three ways you can take action to build up your pension savings more quickly.

1. Check to see if your employer will contribute more

Some employers increase their contributions if you increase the monthly amount you put aside as well. This tends to be a direct match – if you put aside an extra 1%, they add an extra 1%, but there will be a maximum level they will match.

If you are thinking about increasing the amount going into your pension, it can make sense to start as soon as possible. That way your savings will have more time to grow, and they’ll have more chance to benefit from compounding. This is the snowballing effect of growth on the growth you have earned in previous months and years. Read our description of how it works.

2. Consider making extra contributions when you have the money

You may be able to make a one-off payment to your pension if you have the money – for example, from a work bonus. You’re unlikely to have these matched by your employer, but they still benefit from tax relief, so your money gets a boost from the taxman.

3. Check you are claiming tax relief

Some schemes pay your pension contributions from salary that has already been taxed (you’ll be able to work this out from your pay slip), this method is known as Relief At Source. For these schemes Fidelity will claim the basic 20% tax relief for you, but if you pay tax at a rate higher than 20% you may be able to claim further tax relief through your tax return or by contacting HMRC directly. If you are a non-tax payer or you live in Scotland and pay income tax at 19%, you will still benefit from a 20% top up from the government. 

Two allowances to keep in mind

If you’re thinking about contributing more, there are two pension tax allowances that you need to know about:

• Your annual allowance is the maximum level of total pension contributions to all of your pensions (made by yourself, your employer(s) or anyone else) that will receive tax relief in a tax year. It is currently £60,000, although could be lower if you have an adjusted income over £240,000 or you have already made a taxable withdrawal from any of your pension plans.
• The lump sum allowance (LSA) is the maximum amount of tax-free cash you can take from your pension savings in your lifetime. You can take 25% of your pot tax-free, as long as this amount is not higher than the LSA.  

Some people might have a higher allowance if they also had a higher protected lifetime allowance.

Read more about the lump sum allowance

You can find out how these allowances work on our allowances page and remember that tax treatment depends on individual circumstances and tax rules may change in the future.